Days ago, it was finally announced that JetBlue Airways would purchase Spirit Airlines for $3.8 billion, just hours after the latter terminated its merger agreement with competitor Frontier Airlines, a proposal that apparently failed to garner enough shareholder support.
This seems to signal the end of a long, drawn-out battle between the two budget carriers that sought to acquire ultra-low-cost carrier Spirit, but the deal isn’t set in stone just yet. It still needs to gain regulatory approval from the government, which some in the industry speculate just won’t happen.
That’s because the Department of Justice has already initiated an antitrust lawsuit against the existing JetBlue-American Airlines Northeast Alliance, saying it creates an anti-competitive monopoly on northeast routes and could cause airfares to increase.
But, assuming JetBlue’s takeover of Spirit does go ahead, it could spell some major changes for U.S. air travelers.
JetBlue’s Plans for Spirit
Once merged, the airlines would form the fifth-largest carrier in the U.S., coming in just behind the “big four”—American, Delta, United and Southwest. The two carriers will, however, continue to operate separately until the acquisition is finalized.
According to CNBC, JetBlue’s primary ambition is to get bigger, and Spirit can supply the extra planes and pilots to help it do just that.
JetBlue reportedly plans to overhaul Spirit’s existing fleet, ripping out the cramped seating and retrofitting cabins to match its own style. But, until retrofits are completed, passengers may find that their JetBlue flights are being flown aboard Spirit’s bright yellow aircraft.
In addition to growth, JetBlue’s CEO Robin Hayes has said that improving reliability will be a priority for the company, an area in which Spirit has recently outperformed its purchaser.
What About Cheap Fares?
President Biden’s administration has vowed to stamp out any acquisition deals that could harm healthy competition, so the JetBlue-Spirit merger could still be slapped down.
Hayes believes that combining the two carriers would put the resulting airline in a better position to compete with the big four, which currently control over three-quarters of the U.S. market. He argues that making JetBlue bigger would result in more reasonable fares to more destinations.
JetBlue doesn’t offer the kinds of rock-bottom pricing that Spirit does, which also translates to bare-bones service. While still considered a low-cost airline, it does provide more comforts than Spirit, including better legroom, seatback media screens, live TV, free Wi-Fi and complimentary snacks; as well as offering a business class option with lie-flat seating.
Meanwhile, Frontier Airlines, having been rejected in its bid to acquire Spirit, is looking on the bright side. The carrier has said that it will happily take on the larger share of the ultra-low-cost market Spirit leaves behind.
If JetBlue is ultimately successful in merging with Spirit, Frontier will indeed become the country’s largest discount carrier, ahead of others like Allegiant, Avelo and Breeze.
“That just gives us a huge amount of breathing room for growth,” said Frontier CEO Barry Biffle. “That’s why this is such a windfall for our employees and our shareholders.”
Frontier has already projected that the company will grow by 30 percent next year and launched a fare sale, offering a total of one million seats for just $19 apiece.
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Source: TravelPulse
